Suspended Liberal MP Andrew Cornwell has admitted to a corruption inquiry that he pocketed a $10,000 "bribe" from one property developer and used it to pay his tax, and also took an envelope stuffed with cash from a second developer.
Mr Cornwell, the member for Charlestown in the Hunter Valley, told the Independent Commission Against Corruption on Thursday that local property developer Hilton Grugeon gave his wife $10,120 as "payment" for a painting that Mr Cornwell gave the developer at Christmas in 2010.
He also said he took an envelope containing $10,000 in cash from property developer Jeff McCloy, now the Newcastle lord mayor, during a clandestine meeting in Mr McCloy's luxury Bentley in October that year.
Pressure is mounting on Mr McCloy, who denies the claims, to step down as lord mayor during the inquiry.
Mr Cornwell admitted the painting he gave Mr Grugeon was "clearly not" worth $10,000.
Asked if it was an effort to "try and bribe you", Mr Cornwell said: "Yeah, it was definitely an effort to try and curry favour."
He said the money "went towards paying my PAYG tax".
Property developers have been banned from making political donations in NSW since 2009.
Mr Cornwell, formerly the Baird government's chief whip, said he was "uneasy" about taking the money and sought legal advice before his wife banked the cheque. But he did not ask himself if it was "appropriate".
His wife, Samantha Brookes, gave evidence she was "surprised" when a woman from Mr Grugeon's Hunter Land called and asked her to raise an invoice for the painting.
Asked if the invoice was a "sham", Mr Cornwell said: "I think so."
"You should never, ever, ever have accepted that money," counsel assisting the inquiry, Geoffrey Watson, SC, said.
"That's absolutely correct," Mr Cornwell replied.
The ICAC is investigating allegations of "serious irregularities" in the Liberals' successful 2011 election campaigns for Charlestown and fellow Liberal Tim Owen's seat of Newcastle. Mr Owen and Mr Cornwell joined the crossbench on Wednesday.
Mr Cornwell said former police minister Mike Gallacher, who is also under investigation, told him he could sell raffle tickets to Mr Grugeon to raise funds but "clearly you can't, he's a prohibited donor".
He also said Mr Gallacher had told him that then Liberal leader Barry O'Farrell's "people" would "go ape shit" if they knew Mr Grugeon was invited to a fund-raiser.
Earlier, Mr Cornwell said it was a "huge mistake" to take the money from Mr McCloy. He eventually passed it on to the Liberal Party.
Mr Watson has previously suggested the actions of Mr Cornwell and Mr Owen "might be excused on the basis of their inexperience" and "there was no evidence that Mr Cornwell had done any favours for Mr Grugeon".
But he said evidence given to the ICAC on Wednesday afternoon, which will be the subject of further investigation, meant he needed to "withdraw those remarks".
"This is a big if, [but] if it is verified, [it] could cast quite a different light over the conduct of Mr Cornwell and Mr Owen," Mr Watson said.
"But I'll tell you this much: if it is unable to be verified then I'll be back up on my feet and I'll state that as a fact."
Later on Thursday, 2GB radio broadcaster Luke Grant told the ICAC that because of his ''conservative leanings'' he had spoken to Mr Gallacher about running as the Liberal candidate for Newcastle in 2011.
But he later gave media advice to the chosen candidate, Mr Owen, and his $20,000 salary for two months' work was paid by Mr McCloy and Mr Grugeon. He agreed he had not done any ''marketing or consulting'' work for the developers as suggested in invoices.
Mr Grant denied the suggestion put by Mr Grugeon's barrister that the payment was an act of altruism following Mr Grant being ''unceremoniously dumped'' by 2HD in 2009.